China's Latest Hollywood Megadeal Leaves a $100M Open Question

Avi Lerner_Tony Xia_Split - Getty - H 2017
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'Expendables' and 'Olympus Has Fallen' backer Avi Lerner announced a sale of 51 percent of his Millennium Films, but will it actually happen?

Just a few weeks ago, Avi Lerner was poised to collect $205 million through the sale of his Millennium Films to China's Recon Holding. Then, sources say, he changed his mind, selling 51 percent for $100 million. Now it's uncertain whether the indie maverick (and backer of franchises The Expendables and Olympus Has Fallen) will get the cash at all.

Several Chinese sources are skeptical that the deal will close in light of Chinese regulators' crackdown on overseas investment by local firms, part of a broad effort to stem capital outflow. While contracts have been signed, regulatory hurdles still have to be cleared. The heightened scrutiny may have derailed the sale of The Hurt Locker producer Voltage Pictures to Chinese metals manufacturer Anhui Xinke New Materials and delayed Dalian Wanda Group's $1 billion takeover of Dick Clark Productions. The Millennium purchase is smaller, but in doubt.

"People are confused by what exactly Recon is," says one Chinese film company president. It's a subsidiary of Recon Group, headed by Tony Xia, a businessman with little public profile until he took over British soccer club Aston Villa in 2016. In a Feb. 23 news release announcing the purchase, Recon Holding described itself as being "principally involved in two categories of business": film/TV production and the manufacture of industrial wires and cables. But several Chinese entertainment executives surveyed say they've never heard of it.

"If [Recon] is not fully recognized by the China Securities Regulatory Commission as an entertainment and media company," says one exec, "the deal could get rejected."

One Hollywood insider, however, is optimistic: "The deal's been signed. The only hitch would be if there's an antitrust problem, which there won't be, or if the Chinese can't get the money out of China." Recon is believed to have cash in Hong Kong, which should make a money transfer easier.

"If the money is already offshore, they won't need approval," says a Beijing media investor. Otherwise, "there's zero chance this deal gets done." Lerner did not respond to calls for comment.

This story first appeared in the March 17 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.